Performance matters, but so does leaving value on the table

Domestic institutional investor interest has risen, with mutual fund holdings in listed start-ups increasing .

FY25 has seen six venture capital (VC)-backed listings so far, with at least ten more in the works. The public markets have come to terms with what to reward in these businesses—companies that managed growth of over 30 percent and improved their margins by 4 percent have seen the largest gains since 2023.

A typical RainGauge Index company is expected to grow at 1.5 times the rate of an average mid-cap index company over the next three years, yet the mid-cap index has outperformed the RainGauge Index.

What gives? Leaving enough value on the table. This has been reflected in the pricing of recent IPOs—from Digit, which priced its offerings below its last private round, to Ixigo and TBO Tek, which left enough for investors to see record subscriptions and translate the same into handsome listing gains. We expect this trend to continue in the forthcoming venture-backed IPOs as well, where issuers who respect the street sentiment would start their relationship with public investors on the right note.

​

The VC-backed cohort outperformed the NASDAQ and S&P BSE MidCap Index in FY 2024, However, performance was dragged down in May due to correction in index heavyweights

Data as on Feb 29, 2024. Performance(%) quoted is absolute return as on Feb 29, 2024. Data Source: FactSet, NSE, S&P.

An average Indian listed startup trades at 1.2x its mid-cap peers due to growing 1.6x faster

Data source: FactSet; Enterprise Value as on May 31,2024; Revenue & EBITDA as on 31/03/2024

Start-ups that delivered on the promise of growth while improving margins were rewarded by public market investors with better stock performance in FY 2024

Data Source: Factset​; The BFSI companies: HomeFirst Finance, Five Star Business Finance and companies listed after 1/4/23 have not been included in these revenue growth and stock price performance buckets

Data Source: Factset​; The BFSI companies: HomeFirst Finance, Five Star Business Finance and companies listed after 1/4/23 have not been included in these revenue growth and stock price performance buckets

70 percent of RGI companies outperformed the Nifty50, 40 percent outperformed the NASDAQ, 25 percent outperformed the MidCap Index

Data Source: Factset​; Companies listed after 1/4/23 have not been included in the returns tracker

Venture backed IPOs sizes reduced, and the average premium on listing and subscription rose due to buoyant public markets​

Domestic institutional investor interest has risen, with mutual fund holdings in listed start-ups increasing

Despite subdued fundraising, PE/VC firms capitalized on exit opportunities in public markets, selling approximately $5 billion worth of shares in RGI companies via bulk/block trades in FY 2024.

This excludes exits made via Open market trades!

Download the complete report from here.

Kashyap Chanchani is the Managing Partner, while Dhwani Mehta is the Head of Corporate Development at The Rainmaker Group. The firm advises mid-late stage private, venture-backed companies on fundraising.